Lyttelton Port says profit growth may stall on global economy

Wednesday 12th November 2008

Lyttelton Port, which is in talks about an operational merger with its largest South Island rival, said profit growth may stall this year as dwindling global economic growth reduces volumes of freight.

Profit may be about $10 million, plus or minus 5%, in the year ending June 30, from $10.3 million a year earlier, Chairman Rodger Fisher told shareholders at their annual meeting today.

"Economic conditions worldwide seem set to continue worsening and there appears to be no prospect of any immediate significant change to that situation," Fisher said. "We are a company that is volume driven and we have quite high fixed costs."

Last month the port company agreed to explore merger possibilities with Port Otago, to coordinate capital spending, jointly develop new services and reduce costs. Consolidation in the port sector is seen as inevitable as shipping companies rationalise their routes, choosing to visit fewer ports that act more as regional freight hubs. Among changes, Maersk stopped visiting Port of Tauranga and made Auckland its hub.

Ports of Auckland may be preparing to bid on Port of Tauranga's shipping container business. The Auckland company has previously said a full merger with Tauranga is a logical move.

Today, Fisher said profit in the first four months of the year is up 25% though that growth won't hold through the full year.

Shares of Lyttelton don't tend to trade every day. They changed hands at $2.30 yesterday and have fallen 10% this year, while the NZX 50 dropped 30%.

By Jonathan Underhill

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